LG Card Inducing Investments is in Negotiations

LG Card is set to induce both foreign and domestic strategic investors for additional funds through the end of next March in order to normalize its management.

LG Card decided to take on large-scaled restructuring and is aiming to clear out poor assets by the end of 2004 and to bring in clear profits starting in 2005.

LG Card president, Lee Jong-suk, held a press conference yesterday at Seoul Joong-gu Myung-dong Korea Federation of Banks (KFB) and said, “We are negotiating on inducing investments with strategic investors who have positive visions of our company’s future value, and we will either contract an MOU (Memorandum of Understanding) by the first quarter (January~March) of next year or strive to reach specific results.”

President Lee said, “We will open all possibilities of the objects of negotiation, the form of investment, and the passing over of management rights.” He added, “We have chosen Morgan Stanley to be the foreign capital inducement consulting company and have already started arrangements for the actual inspection.”

President Lee did not discuss in detail surrounding the objects in negotiation because of “the promise to keep it a secret.” However, it has been discovered that the Capital Group, the second largest shareholder of the company with 11.14 percent of the shares, Citibank, and HSBC are showing interest in undertaking the shares.

President Lee also added, “In the process of selling the shares, we will not reduce the capital of the existing shareholders, in order to protect their profits.”

Meanwhile, LG Card plans to clear out five trillion won in poor assets by the end of this year and four trillion won by 2004, and has pledged to grow into an A-rated company, bringing a yearly 6,000 billion won in short term net profits with 20 trillion won in assets.

In order to realize this, 2,100 regular and temporary employees will be retired early by the end of this year, lowering the total number of employees to 6,300 people, and the 109 branch offices will be reduced to 50.

Carrying out unnecessary marketing expenses will also be restrained and so, a yearly 4,000 billion won in marketing and managing expenses will be spared, maintaining a 9,000 billion won level.

Ji Dong-hyun, vice president of the strategic planning department of LG Card said, “If the investments of strategic investors become specific, we are anticipating to supply funds from the bond market. If the situation becomes worse, the additional 7,000 billion won in funds, which was planned to be supplied around the end of next March, will be completed earlier.”

Suk-Ho Shin kyle@donga.com